Preventing Retail Theft

In retail, you want your products to fly off the shelves and out the door--but only after they've been paid for. Theft--both by customers and employees--costs American retailers more than $33 billion per year. Entire retail chains have gone out of business due to their inability to control losses from theft.

The biggest threat facing storeowners is employee theft, which accounts for nearly half of inventory shrinkage--more than shoplifters, more than administrative error and more than vendor fraud. Minimize the possibility of employee theft by hiring only people you know well or by checking references carefully. Unfortunately, neither of these steps will eliminate the possibility that an employee may steal. Standard controls should be implemented to detect losses from your cash drawer and inventory. These include:

Maintain rotating employee assignments. Team different employees together or with you.

Initiate procedures for balancing the cash register or drawer after each employee's shift.

Take physical inventory at least annually, more often if practical.

Check daily receipts against a list of items sold.

Randomly monitor the inventory of particular items and compare with recorded sales over a period of time.

If you suspect an employee of stealing, randomly audit sales by contacting customers to verify sale details. You can do this as a routine survey of customer service.

Don't be so obsessed with catching a potential thief that you treat your employees with suspicion and disrespect. They deserve to be trusted and treated with respect and confidence unless evidence indicates otherwise. The simple controls outlined above will not catch all pilferage, but they will usually disclose discrepancies if you use them consistently.

Shoplifters are another story. They account for more than $10 billion of loss a year. You'll have less opportunity to catch them as you won't necessarily recognize their faces or be on the lookout when one comes into the store. Still, there are a few steps you can take to reduce the temptation for would-be shoplifters.

Put items that are easy to shoplift close to the checkout counter.

Maintain a good line of sight to sections of your store where desirable items are displayed.

Use packaging that is hard to conceal.

Make your presence known throughout the store. Don't hound your customers, but try to wander through the store periodically, greeting customers in a friendly manner.

Consider using electronic tags with a sensing device at the door, if you are unable to control theft any other way.

Pay particular attention to people whom you do not know, people carrying large bags, and mothers with strollers or baby carriages.

Post signs stating your policy of prosecuting shoplifters.

A word of caution: Do not confront someone whom you suspect of shoplifting, unless you are sure--and then only when other employees are around and you have ready access to security forces. Do not try to stop a shoplifter when you are alone in the store. Some can be dangerous, and recovering a stolen item is not worth endangering your life.

Ronald Bond has more than 30 years of experience as a manager, CEO, consultant and small-business owner. He is the author of Retail in Detail, available from Entrepreneur Press.